Executive Summary
GMS Inc posted a Q1 FY2025 net sales of $1.45 billion, up 2.8% year over year, driven by volume growth across major product categories fueled by recent acquisitions (notably Yvon in Canada and, as announced, RS Elliott). Organic sales declined 2.2% as steel price deflation and soft Canadian single-family residential activity pressured volumes, with a notable shift toward lower-margin wallboard mixes in a challenging end-market environment. Gross margin contracted 80 basis points to 31.2% due to ongoing steel price deflation and price-to-mix effects—particularly from a shift to single-family wallboard deliveries and slower price realization in commercial/multi-family projects. Net income declined 34.1% year over year to $57.2 million, or $1.42 per diluted share, while adjusted net income fell 24.9% to $77.6 million ($1.93 per diluted share). Adjusted EBITDA decreased 15.8% to $145.9 million, with an EBITDA margin of 10.1%. In response to near-term headwinds, management initiated a $25 million annualized cost-reduction program aimed at simplifying operations, centralized procurement, and route optimization to preserve profitability in a softer demand backdrop. Management remains constructive on medium- to long-term demand, emphasizing a balanced mix of commercial and residential exposure, ongoing M&A activity, and productivity gains from technology and scale. The company guided Q2 2025 net sales to increase modestly, with gross margin expected to improve to 31.6–31.8% as wallboard price increases pass through, and adjusted EBITDA of $163–$168 million (approximately 11% EBITDA margin). Near-term risk stems from further steel price volatility, a slower-than-expected housing rebound, and macro headwinds; upside could come from faster-than-expected rate reductions supporting single-family activity and stronger backlog execution.
Key Performance Indicators
QoQ: -3.36% | YoY:-25.32%
Key Insights
Revenue: $1.45B, YoY +2.8%, QoQ +2.5%. Gross profit: $451.6M; gross margin 31.2% (−80 bps YoY). Operating income: $98.38M; operating margin 6.79%. EBITDA: $138.07M; EBITDA margin 9.53%. Net income: $57.25M; net income margin 3.95%. Diluted EPS: $1.42; weighted average shares diluted 40.23M. Adjusted EBITDA: $145.9M; adjusted EBITDA margin 10.1%. Adjusted net income: $77.6M; adjusted EPS $1.93. Cash flow: operating cash flow −$22.94M; free cash flow −$31.9M. Capex: $9.0M; full-year capex gu...
Financial Highlights
Revenue: $1.45B, YoY +2.8%, QoQ +2.5%. Gross profit: $451.6M; gross margin 31.2% (−80 bps YoY). Operating income: $98.38M; operating margin 6.79%. EBITDA: $138.07M; EBITDA margin 9.53%. Net income: $57.25M; net income margin 3.95%. Diluted EPS: $1.42; weighted average shares diluted 40.23M. Adjusted EBITDA: $145.9M; adjusted EBITDA margin 10.1%. Adjusted net income: $77.6M; adjusted EPS $1.93. Cash flow: operating cash flow −$22.94M; free cash flow −$31.9M. Capex: $9.0M; full-year capex guidance around $50M. Liquidity: cash at end of period $53.2M; revolver available liquidity $565.3M. Net debt: $1.6207B; Net debt/Adjusted EBITDA ≈ 2.1x. Backlog comments and acquirer impact: Yvon closed July 2024; RS Elliott acquisition announced; RS Elliott 12-month revenue ≈ $70M (June 2024) with accretive EBITDA margins. Wallboard pricing: average realized price $4.77/1,000 sf (vs. $4.75 in prior quarter); July price unchanged at $4.77. DSO fell 17%; inventory turns up >10%; wallboard turns near 16x.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.45B |
2.76% |
2.51% |
| Gross Profit |
451.56M |
0.22% |
8.65% |
| Operating Income |
98.38M |
-25.32% |
-3.36% |
| Net Income |
57.25M |
-34.07% |
1.53% |
| EPS |
1.45 |
-31.92% |
2.11% |
Key Financial Ratios
operatingProfitMargin
6.79%
operatingCashFlowPerShare
$-0.58
freeCashFlowPerShare
$-0.81
Management Commentary
Key management themes from the QQ1 2025 earnings call:
- Strategy and market view: John Turner emphasized that easing interest rates should eventually trigger a broad housing recovery, with single-family leading the rebound, followed by commercial and then multi-family. The company remains confident in its diversified, balanced revenue mix and in pursuing an active M&A pipeline to broaden complementary offerings (Roofing/Lumber in Canada and RS Elliott in the Exteriors/EIFS space).
- Pricing and margins: Turner noted resilience in wallboard pricing and the company’s ability to realize like-for-like price increases, though the cadence is slower in a soft market. He stressed that gross margin headwinds stem from steel price deflation and a shift toward lower-priced single-family wallboard deliveries, with an expectation that price realization will recover as demand improves. He suggested long-run gross margins could be 32%+ as price gaps close.
- Cost actions and cash generation: The company announced a $25 million annualized cost reduction program to offset near-term volume challenges, focusing on overhead reduction, centralized procurement, yard efficiency, routing improvements, and consolidation of select yards. Deakin highlighted that half of the savings would be realized in Q2 and the full benefit by Q3.
- Acquisitions and integration: Management highlighted Yvon and RS Elliott as strategic complements to accelerate expansion in Canada and the Exteriors segment, with RS Elliott expected to be accretive to EBITDA margins. They indicated a constructive view on integrating these platforms to drive scale and cross-selling of complementary products.
- End-market dynamics and outlook: The call detailed a softer July and near-term visibility challenges, with expectations of continued volatility in end markets and pricing. The team pointed to external indicators (ABI, Dodge Momentum Index) as variables to watch for the trajectory of the commercial cycle and housing demand.
"over time, in the long run we're 32% plus gross margin company, and we're working to get back there."
— John Turner
"It's about half of -- this quarter we'll get about half of what you'll see in a normal quarter and by next -- by the third quarter we'll be getting it all."
— John Turner
Forward Guidance
Management guided for Q2 2025 net sales to be up low-to-mid single digits versus the prior year, with organic sales down low single digits due to a continued adverse mix from steel deflation. Gross margin is expected to improve sequentially to 31.6%–31.8% as wallboard price increases pass through, and adjusted EBITDA is projected in the range of $163–$168 million (about 11% EBITDA margin). The guidance reflects an anticipated bottoming of the cycle in the near term, followed by a potential recovery in 2025 as housing demand improves with lower rates. Key monitoring factors include: (1) pace of single-family housing recovery and starts data, (2) pass-through speed and sustainability of wallboard price increases, (3) evolution of steel input costs and potential tariffs or price stabilization, (4) execution of cost-reduction benefits and integration progress of Yvon and RS Elliott, and (5) end-market backlog conversion and project timing (especially data centers, healthcare, and CHIPS/Infrastructure-driven programs). We assess achievability as moderate-to-positive given the hedges provided by pricing actions and the potential for rate cuts to lift demand, but offset by ongoing steel price volatility and a choppy construction cycle.